Market Integrity Update - Issue 110 - November 2019

Issue 110, November 2019

Outcomes from our review of Bloomberg Tradebook

We’ve made several recommendations following our recent assessment of the markets operated by Bloomberg Tradebook Australia Pty Ltd (BTA).

Report 634 Market assessment report: Bloomberg Tradebook Australia Pty Ltd makes recommendations which are intended to improve BTA’s arrangements for governance, supervision and enforcement, and systems and controls, to meet increasing regulatory and investor expectations of wholesale market operators.

As part of its terminal offering, Bloomberg provides access through BTA to five electronic markets that offer trading in bonds and debentures, derivatives and spot foreign exchange.

The assessment was designed to promote the integrity of fixed income, currency and commodities (FICC) markets, and make sure the trading infrastructure that supports these markets is well run and operationally robust. This is essential to ensure confidence in these markets by investors and consumers.

We encourage all specialised market operators we regulate to review these findings and recommendations to determine what is applicable to their market operation.

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Market Liaison Meeting – 28 November

Market stakeholders are invited to attend the next Market Liaison Meeting on 28 November 2019 in Sydney and Melbourne. These free quarterly meetings provide insights into the ASIC Markets Group’s strategic priorities and how we’re tracking against them.

The meeting will include presentations on:

  • Corporate Governance Taskforce: Director and officer oversight of the non-financial risk report
  • observations from supervision of exchange markets
  • wholesale OTC derivatives
  • cyber security
  • financial market infrastructure reforms.

ASIC Commissioner, Cathie Armour, will also provide an update, and we will invite questions from the audience.

A live broadcast of the event will be held across our Sydney and Melbourne locations. Please indicate your location when registering.

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Cooperation with European Securities and Markets Authority on benchmarks

We’ve signed a memorandum of understanding (MoU) with the European Securities and Markets Authority, setting out cooperation arrangements in respect of Australian benchmarks.

The EU Benchmarks Regulation (BMR) prescribes a European common framework to ensure the integrity and accuracy of benchmarks used in the EU.

On 29 July 2019, under Article 30 of Regulation (EU) 2016/1011, the European Commission recognised Australia’s legal and supervisory framework applicable to the administrators of certain financial benchmarks as equivalent to the corresponding requirements under the BMR and recognised that those requirements are subject to effective supervision and enforcement.

This decision will allow benchmarks we declare significant (BBSW, S&P/ASX200, Bond Futures Settlement Price, CPI and Cash Rate) to be used in the EU by EU-supervised entities.

The MoU sets out appropriate cooperation arrangements to complement the EU’s equivalence decision, as well as to ensure effective information exchange and supervisory coordination. Under it, both authorities agree to provide each other with the fullest cooperation permissible under their laws and regulations in relation to all relevant information and supervisory activities regarding the covered benchmarks.

Both authorities agree to confidentiality requirements for any information shared, requests made, and contents of the requests made, under the MoU.

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ASIC’s 2018–19 Annual Report published

Our 2018–19 Annual Report has been published, highlighting our activities and performance for the previous financial year.

Throughout the year, significant progress was made in our strategic change program that began in early 2018. As part of that change program, we:

  • significantly increased and accelerated our use of enforcement action, and we’re now looking to use the full extent of new penalties and powers. In 2018–19, there’s been:
    • a 20% increase in the number of enforcement investigations
    • a 51% increase in the number of enforcement investigations involving Australia’s largest financial institutions (or their officers, employees or subsidiary companies)
  • established the Office of Enforcement to carry out key enforcement activities and coordinate enforcement strategy, including the implementation of our ‘Why not litigate?’ operational discipline
  • enhanced key aspects of our supervisory approach, as part of our response to widespread conduct failures in the Australian financial services industry. The Close and Continuous Monitoring program and Corporate Governance Taskforce aim to promote permanent cultural and behavioural change in financial firms across the financial services markets.

Our work has also been guided by the outcomes of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Matters highlighted or referred to by the Royal Commission have been prioritised, and work continues implementing our new obligations and responsibilities included in its recommendations.

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Update on our binary options and CFDs consultation

We’re currently considering the feedback we received on Consultation Paper 322 Product intervention: OTC binary options and CFDs (CP 322). We consulted on using our product intervention power to address significant detriment to retail clients from trading over-the-counter (OTC) binary options and contracts for difference (CFDs).

CP 322 sets out our proposals to make certain market-wide product intervention orders relating to the issue and distribution of OTC binary options and CFDs to retail clients.

We’ve received over 400 responses to our proposals from product issuers, industry groups, consumer groups, consumers and other interested stakeholders.

We’re currently considering all the feedback we’ve received. We’ll continue to engage with respondents as necessary to aid our consideration. We’ll also examine the likely regulatory and financial impact of each of our proposals, as well as alternative options that could meet our objective of reducing detriment to retail clients.

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Last updated: 23/11/2020 09:34